Philosophy

Do you have an investment philosophy? You should. By Miles McDannald, MBA, CRPS® Haven’t heard of an investment philosophy? Well, I would guess you have, you just didn’t know that’s what it was. Many firms just group philosophy and strategy together and call it a plan. That is fine, as long as you and your advisor clearly understand where your beliefs are and why you are the type of investor that you are. Sure you have a strategy, but what is the basis of your strategy? You can think of your philosophy as your investment belief system. Your strategy is how you are going to get it done, but the philosophy is the basis for what types of basic investments you will use, what timeframe you will use them, and what valuations you will accept. Many times investors and prospective investors get stuck in what I call “the chase”. Chasing big returns, big income, or media hype. There are complete businesses built upon creating “buzz” around companies going public or being listed on an exchange. The most effective long term investors filter the hype and stick to the philosophy that guides their strategy. If investing in IPOs is your strategy, that is fine, but if not, don’t let yourself get caught up. Even the most seasoned investor can become enamored by the media frenzy. Researching various philosophies around investing can also help you craft your own system. If this all sounds Greek, then consider getting help. We manage our health through a healthcare provider, our dental health through a dental care provider, our legal affairs through legal counsel. Finances should be no different. If you don’t have a trusted financial advisor, interview several and ask lots of questions. Trust is very important in this relationship and you need that confidence in whoever you are getting counsel from. You need someone to help you filter through the hype, the sales pitch and get to the fundamental reasons for investing, or not investing in a particular option.